Fund of the week: Buying tomorrow's giants today

Over the past five years, this smaller-companies fund has made an 86% return by buying small companies with predictable growth, and then holding on to them.

Harry Nimmo is no novice. He's run Standard Life Investments UK Smaller Companies Trust (LSE: SLS) since its launch in 1997. He joined after graduating from the University of Edinburgh and has worked for the company for 25 years.

And he makes that experience count. Over the past five years he has produced an 86% return compared to a sector average of 25%. That makes his fund the top performer in the IMA UK Smaller Companies sector. Nimmo puts his success down to his ability to "buy tomorrow's large companies today", he tells Investment Week. He looks for predictable growth in a proven business, then sticks with his chosen firms. "We don't turn over the portfolio very often and tend to hold stocks on average for about four years."

Recent additions to the portfolio include CPP Group a firm that helps people protect themselves against card and identity theft. "I like world leaders in niche markets," says Nimmo. He's also a fan of Hikma Pharmaceuticals. This UK-listed, Jordan-based, generic pharmaceutical firm has a leading position in the Middle East and North Africa. Its main competitor is Israeli generic drug group Teva, which helpfully "cannot do any business in the Middle East or North Africa, apart from Israel".

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Nimmo's impressive performance hasn't gone unnoticed. In March his fund won the UK Small Companies category at the MoneyWise Investment Trust Awards for the fourth year in a row. At the time, Nimmo said: "our focus on resilient companies with organic growth and visible earnings enables us to look forward to the future with great confidence". Adrian Lowcock of Bestinvest reckons that confidence is fully justified and urges investors to get in.

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Standard Life Smaller Cos Trust top ten holdings

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Paddy Power3.4
Dominos Pizza2.9
Hargreaves Lansdown2.9
Quantum Group2.8
Aveva Group2.7
Chemring Group2.6
New Britain Palm Oil2.6
Fidessa Group2.6